Tag Archives: recession

New Zealand Television and the Year That Was

It was the best of times, it was the worst of times.

That well-trodden phrase pretty much sums up the year that was 2009, at least for New Zealand television broadcasters.

Audience levels were up, up, up. Advertising revenue was — well, let’s not even go there.

The NZ Television Broadcasters Council finally had some good news to share last week:

  • The average viewer watched 3 hours 17 minutes of TV daily in 2009, an increase of 9 minutes per day or 4.8% over 2008.
  • Not only that, but more people were watching in total. On a daily basis, 2.94 million people watched television last year, up almost 63,000 or 2.2% over 2008.

We do need to put these numbers in a little bit of context: television viewing levels do rise in recessionary times, as typically do movie attendances. We may not be able to afford that fancy new car or indulge in that Manolo Blahnik footwear obsession, but by golly we can still manage some small indulgences.

So bravo! television broadcasters for benefiting from tough times. But do remain suitably modest about the achievement, okay?

Economic Recovery: Are We There Yet?


“Media owners have provided a great deal of additional value during the past six to nine months but we’re now entering a more ‘normalised’ environment. So trading will have to return to contracted levels.” TVNZ Head of Sales Dave Walker, quoted in Planit (14 October 2009)

MediaWorks CEO Brent Impey was similarly bullish at the TV3/C4 New Season launch, reporting that business has really picked up over the last eight weeks; and more money has been booked on television with MediaWorks in the last seven days than ever before in its history.

So — back to business as usual then, at least for television?

Alas, if only it were that simple. As we’ve learned from past “economic corrections”, the fourth quarter of each year is always a time of hope, when those marketers who have held back during the earlier part of the year spend what pennies they can scrape together, hoping for at least some Christmas sales to offset what’s been for most an annus horribilis.

Much as we’d like to believe that those “green shoots” of economic recovery spotted by optimistic observers will blossom forth and bear sumptuous harvest (if we may be forgiven for threshing the metaphor) — we fear that this new growth spurt won’t last past Boxing Day.

We’re not just being cantankerous. Despite the well-documented restoration of consumer and even business confidence, in our opinion it’s only skin-deep; the underlying realities suggest a slow recovery. As Reserve Bank Governor Alan Bollard observed recently, “we expect the economy to begin growing again toward the end of [2009], but the recovery is likely to be slow and drawn out. It could also be erratic. To many households it may not feel like a recovery at all, with lower employment, house prices and wage increases into next year.”

Businesses will be starting to plan now (or soon) for 2010/11 financial years starting in April or July 2010. Based on current trading conditions, company finance directors are unlikely to approve significant marketing budget increases for next year — green  shoots may look pretty in the garden but they don’t stand up too well under the harsh spotlights of the boardroom.

As a result, we don’t expect marketing budgets to show much improvement until 2011. Consumers and businesses may well be telling researchers that they expect conditions to improve over the next twelve months — but that’s largely expressing an expectation that things won’t get any worse, not that they’ll suddenly turn absolutely fabulous.

Even Christmas 2009 may not provide the boost that business is anticipating. The latest Kiwi consumer credit figures (to August 31) show a 4.6% slump in borrowing; and Kiwis are saving just 0.2% more than they were twelve months ago. Philip Borkin, economist at ANZ National Bank, summed up the challenge we all face: “A lot of people are paying down debt, and until we see the credit numbers improve, we’re not expecting much to change. For retailers this is a critical time – if we don’t get a pick-up then this could be a very challenging time for them.”

Economists’ cautions are supported by other indicators. Jasons Travel Media recently asked Kiwis what they’re planning to do for the Christmas and summer holidays. A staggering 60% of respondents are changing their plans from the norm this summer – opting to spend their time somewhere other than where they have gone for summer holidays in the past. When asked, there were a plethora of reasons for the break from traditional plans including ‘better deals on accommodation elsewhere’, ‘decided to go somewhere close’ and ‘money is a bit tight this year’. In those Clintonesque words, “It’s the economy, stupid”.

It’s not just us, of course. The latest news from the land of (former?) Hope and (lost?) Glory suggests that parsimony rather than plenty is a global reality these holidays.

The just-published Holiday Forecast Consumer Behaviour Report from PriceGrabber.com finds that this holiday season American consumers will NOT be buying Christmas goodies for:

  • Acquaintances, 57%
  • Co-workers, 53%
  • Service providers (eg parking attendant, housekeeper), 44%
  • Extended family (sorry auntie), 42%
  • Friends, 31%

Other Holiday Trends from the PriceGrabber.com survey of 2,018 online consumers, conducted from Sept. 24, 2009 to Oct. 12, 2009:

Consumers are more price-sensitive than ever
More than ever, comparison shopping is on the forefront of consumers’ minds, with 70 percent of consumers doing more research and comparison shopping online, compared with 38 percent last year. And fifty percent of consumers are planning to shop at discount or outlet stores this year, while only 43 percent did so last year.

Consumers are cutting back
Fifty-three percent of consumers are planning to spend less than they did last year. Of the consumers who are planning to spend less this Christmas, 48 percent reveal that one of the reasons that they are spending less is due to an increase in prices (necessities, gas, etc.), 45 percent cite lack of confidence in the economy, and 38 percent indicate making less money as a reason for spending less.

Shopping has started earlier, to ease the impact of holiday spending
In past years, Black Friday (the day after Thanksgiving, late in November) has been the unofficial start of the American holiday shopping season. This year, US consumers are planning to start their holiday shopping long before Black Friday, with 22 percent of consumers starting their holiday shopping in October and 29 percent starting in November.

In New Zealand, retailers have been in Christmas shopping mode for some time. The ubiquitous Cameron Brewer, chief executive of the Newmarket Business Association, warned in late September that “for better or worse consumers can expect to see Christmas decorations and displays popping up in some New Zealand shops over the next few weeks.”

Kiwis usually do their shopping somewhat ahead of the Christmas rush anyway. A 2007 study by AMP Capital Shopping Centres found that:

  • 25% of Kiwis have begun their Christmas shopping by September 25, three months out from Christmas
  • 16% start shopping in October
  • 21% hit the malls in November
  • 33% wait until the last fortnight before Christmas
  • 7% of us (three-quarters male, inevitably) leave Christmas shopping until the last minute
  • Meanwhile an impossibly virtuous 3% head to the Boxing Day sales with vim and vigour, buying their gifts for the following year 364 days early.

Gift lists are trimmed down to manage budgets
When it comes to holiday spending this year, 36 percent of US consumers expect to spend between $100 and $499, 28 percent plan to spend $500 to $999, and 30 percent anticipate a holiday spend of $1,000 or more.

We don’t have any recent NZ data for Christmas spend levels, but a five-year-old study by UMR Research on behalf of Visa International found that:

  • More than 50% of Kiwis expected to spend less than $300 on Christmas gifts
  • 16 percent intended to spend less than $100
  • One in twenty said they were planning to “splash out” and spend more than $1000
  • Credit card holders were more likely to expect to spend over $500 than non-cardholders (22 percent compared with 12 percent)
  • Men generally planned to spend slightly more than women
  • The most profligate age group was 30-44 year-olds.

Add a few dollars for five years of moderate inflation, deduct as required for economic downturn du jour, season to taste.

THAT’S THE CONSUMER, WHAT ABOUT BUSINESS?

The biggest declines in Year On Year reported advertising expenditure (according to Nielsen Media Research data, Jan-Aug 2009 vs Jan-Aug 2008, at ratecard values) are:

  • Automotive (down $20.1 million)
  • Investment/Finance/Banking (down $17.8 million)
  • Government (down $11.8 million)
  • Home Improvements (down $7.7 million)

In terms of individual advertisers, Telecom has had the biggest drop in reported spend, down by 32% ($10.7 million) YOY. 16 of the top 20 advertisers would seem to have recorded YOY expenditure increases, but we suspect this has more to do with better deals being negotiated in recessionary times rather than extra dollars squeezed out of corporate coffers.

Are we likely to see any of those lost ad dollars return in 2010?
We don’t expect the Financial sector to dip into its battered piggy banks in the near future. As we’ve already seen, consumer borrowing remains down as we pay off our debts (just in case). The housing boom is over so we won’t be desperately seeking mortgages every six months; and our memories of the financial sector meltdown are all too fresh, so the non-bank financial intermediaries are rather less likely to advertise just now.

The Government? Officially on a fiscal diet. We’ll see a splurge of local body activity in Local Election Year 2010, especially as the SuperCity emerges from its chrysalis, but that doesn’t usually translate into big dollars.

Automotive? Well, you know what’s been happening offshore. Within New Zealand, if we look at how many Kiwis say they’ll be buying a new car within the next six months, that number’s dropped from 41,000 in July 2008 to 24,000 in July 2009 (Roy Morgan Single Source data).

Home Improvements? According to Roy Morgan Single Source, 706,000 Kiwis say they plan to refurbish or redecorate their home in some way (such as replacing curtains, carpet or wallpaper) in the next year — well down from 830,000 twelve months ago. And just 367,000 (was 460,000) are planning to spend more than $5,000 renovating or extending their homes in the next twelve months. With fewer consumers willing to pimp their homes, competition’s going to be fiercer than ever for the Home Improvement dollar.

THE MULTINATIONAL EFFECT

As a small country far out in the uncharted backwaters of the unfashionable end of the Western Spiral arm of the Galaxy, New Zealand is at the mercy of global forces in a number of ways, not least the dark and mysterious menace known as the multinational balance sheet. As each quarterly reporting deadline looms in the financial capitals of the world, global CFOs swoop on allocated but unspent marketing budgets from the tiny, farflung outposts of their empires in a futile botoxian effort to tart up the numbers.

Given the current economic woes in most of the countries to which our multinational branches report, local marketing budgets won’t be doing anything but shrinking in most 2009/10 financial years — which takes us to October or November 2010 (based on typical multinational financial years) before any fiscal relief is even theoretically possible.

In other words, multinational marketers (the biggest spenders in our mass media) won’t be driving any Kiwi advertising recovery any time soon. Don’t batten down the ratecard just yet.

MEDIA FORECASTS FROM ELSEWHERE

Our global counterparts aren’t expecting much from 2010. World Advertising Research Centre (WARC) media inflation forecasts for the year ahead (just released) don’t inspire much optimism unless you live in the emerging economies of China, India or Russia. Projections for media inflation (2010 vs 2010) for three of our key indicator markets:

Australia:

  • Television up 1.6%
  • Newspapers up 0.6%
  • Magazines no change
  • Radio up 0.5%
  • Cinema up 0.8%
  • Out of home up 1.1%
  • Internet up 5.5%

United Kingdom:

  • Television down 3.3%
  • Newspapers down 0.6%
  • Magazines down 2.4%
  • Radio down 2.0%
  • Cinema down 0.5%
  • Out of home down 0.8%
  • Internet down 5.8%

USA:

  • Television down 5.0%
  • Newspapers down 4.5%
  • Magazines up 1.0%
  • Radio down 5.0%
  • Cinema up 2.0%
  • Out of home down 1.0%
  • Internet up 0.5%

Not much there to encourage embattled media owners.

SO ARE WE THERE YET?

We’ve seen the feathers, we’ve heard the tweets, but so far no actual sighting of the first cuckoo of a new economic spring. Our consensus view at this point is for a seasonal uptick till Christmas, then slow simmering during 2010. Sorry.

This article is drawn from our presentation MEDIA 2010: A Sneak Peak At What Lies Ahead. If you’re a Media Counsel client, please talk to your TMC team about scheduling a time for us to present MEDIA 2010 to you and your colleagues.

On Recessions and Cheap Dates

New Zealanders believe the recession is nowhere near as bad as predicted and question the reporting of such stories in the media, according to a new survey released late last week by Research International. But many are nervous about the role the recession could yet play. A third of the workforce are not convinced their jobs are secure. Two thirds of all respondents have said they are trying to pay for things more with cash rather than credit now and 44% have said they are trying much harder to pay off debt. One Gen X respondent to the survey summed up their attitudes: “I’m reducing debt and trying to build a bit of security, if I were to lose my job tomorrow, then how long could I survive living my life as it is at the moment”.
Meanwhile a nationwide ‘Kiwi Wine Habits’ survey commissioned by Liquorland has revealed that tough economic times are affecting the price Kiwis are willing to spend on their favourite drop. Almost half of the survey respondents admitted the recession is impacting the amount of money they are prepared to spend on wine. The majority (67%) of New Zealanders are now spending $11 to $20 on a bottle of wine when entertaining at home.
When questioned on the largest amount they have ever spent on a bottle of wine, 26.6% of New Zealanders answered $21 to $30. Only 11.3% have ever spent over $100 on a bottle of wine.

New Zealanders believe the recession is nowhere near as bad as predicted and question the reporting of such stories in the media, according to a new survey released late last week by Research International. But many are nervous about the role the recession could yet play. A third of the workforce are not convinced their jobs are secure. Two thirds of all respondents have said they are trying to pay for things more with cash rather than credit now and 44% have said they are trying much harder to pay off debt. One Gen X respondent to the survey summed up their attitudes: “I’m reducing debt and trying to build a bit of security, if I were to lose my job tomorrow, then how long could I survive living my life as it is at the moment”.

Meanwhile a nationwide ‘Kiwi Wine Habits’ survey commissioned by Liquorland has revealed that tough economic times are affecting the price Kiwis are willing to spend on their favourite drop. Almost half of the survey respondents admitted the recession is impacting the amount of money they are prepared to spend on wine. The majority (67%) of New Zealanders are now spending $11 to $20 on a bottle of wine when entertaining at home.

When questioned on the largest amount they have ever spent on a bottle of wine, 26.6% of New Zealanders answered $21 to $30. Only 11.3% have ever spent over $100 on a bottle of wine.

In Our Latest Newsletter

The MAY edition of our MARKETING MANIFESTO newsletter has just hit the inboxes of our eager subscribers. Included in this issue:

You’ll Have To Start The Recession Without Us
As you may have noticed, consumers are starting to feel a little financially squeezed thanks to The Economic Pandemic (we’d adopt the cliche du jour, “The Perfect Storm”, but somehow that seems a little too sanitised to describe what’s actually happening out there). Pity us poor Kiwis. It’s Election Year and by now we should expect to be enjoying generous tax cuts, manageable interest rates and the promise of bulging loot bags come the post-election party. Instead we’re reeling from out-of-control petrol prices, supersized food costs and leaky home values. Retail sales are stagnating, easy credit is as out of reach as finance company promises and butter has become a status symbol of the rich and famous …

When A Promotion Works Only Too Well
Isn’t it fantastic when a sales promotion works gangbusters, pumping up product demand and truly resonating with core consumers? Umm — not always, apparently. Take the case of Bluebird Foods, whose Super 14 Rugby Cards have caused parental headaches and even a schoolyard robbery and attracted the official wrath of the Ministry of Health …

Sky Television Heads Online
Sky Television has made it clear for some time that the company has been purchasing internet rights for the shows it’s been purchasing for television broadcasting. It’s finally time for Sky to exploit those rights — from next week Sky subscribers will be able to download many of the programmes broadcast on the network and watch them on their home PC, in their own time …

Buzz Marketing Illegal In The UK?
And we thought we had it tough here, in the wake of the Unsolicited Electronic Messages Act. In the UK the IPA is warning British industry that restrictions on commercial communication via the internet, social networking and word of mouth communications, are to be made much stricter and in some cases may become illegal …

The Hidden Danger Of The Fine Print
Organising a sales promotion just got a whole lot tougher with the news last week that Progressive Enterprises Limited has been found guilty of breaching the Fair Trading Act by offering the opportunity to enter into a prize draw to win a holiday, despite the fact that the competition had closed months earlier …

UK Internet Advertising To Overtake TV?
If current trends continue, UK internet advertising is set to overtake the 3.4 billion pound TV advertising market in the next two years, according to recent figures from the UK Internet Advertising Bureau and PricewaterhouseCoopers which show that online ad revenue grew by 38% during 2007 to 2.8 billion pounds. This growth lifted the web’s share of UK adspend to 15.3%, putting it on course to surpass TV to become the biggest single advertising medium in the kingdom …

If you’d like a free copy of the newsletter, to read the full stories, simply email us at newsletter@mediacounsel.co.nz requesting the May edition.